Information Returns Master File Processing

IRMF processing creates a master file of current tax year information returns and maintains access to five prior years. Beginning in May of each year, extracts are made from the entire IRMF weekly. The primary customers for this information are Examination, Collection, Federal/State Relations, Criminal Investigation and Research. Data is also provided to Federal and State Agencies. A VSAM version of the file is maintained.

1. Describe the information (data elements and fields) available in the system in the following categories:
A. Taxpayer
B. Employee
C. Audit Trail Information (including employee log-in info)
D. Other (Describe)

Taxpayer/Other: Income paid to an individual or organization for a given tax year. The taxpayer (payee) information is reported using a variety of forms (see below) and include information such as wages, dividends, interest, cash payments, shareholder income, etc., and information to identify both the payee and payer (name, TIN and address).

B. Employee: None.

C. Audit Trail Information: Master files by definition do not have an audit trail. They are defined as having interfaces to systems that maintain their own audit trails. There is no direct access to IRMF data. All access is through batch files. The data viewed by authorized IRS employees is a copy of the IMF data loaded into any of a number of other systems that have a user interface. These systems maintain the authentication and authorization required, including the use of audit trail information.

D. Other: None.

2. Describe/identify which data elements are obtained from files, databases, individuals, or any other sources.
A. IRS
B. Taxpayer
C. Employee
D. Other Federal Agencies (List agency)
E. State and Local Agencies (List agency)
F. Other third party sources (Describe)

The data is reported by the payer on various forms and schedules (F1096, F1042, F1098, F1099, Sch K-1, F5498, F8300 and F8362). Social Security Administration provides the data reported on W-2s, W-3s, W-4s. Customs Service reports International Transportation of Currency or Monetary Instruments (CMIR).

3. Is each data item required for the business purpose of the system? Explain.

Yes. The name, TIN, and address are required to identify the taxpayer’s account. The income, deductions, credits, etc. reported on the tax return, as well as any payments received, are required to settle the taxpayer’s account, and maintain a record of taxes assessed, abated and collected.

4. How will each data item be verified for accuracy, timeliness, and completeness?

Validation of SSA data is a joint effort between SSA and IRS.
IRS monitors the compliance of payers required to report income for accuracy, timeliness and completeness. This payer compliance program works to bring payers into compliance, but has the authority to assess penalties for each information return reported with errors.

5. Is there another source for the data? Explain how that source is or is not used. No.

6. Generally, how will data be retrieved by the user?

IRMF data is not directly accessible by users. Data is extracted on a weekly basis for reports and for loading into other IRS systems, which provide read-only access to the data (on a need to know basis). The data are extracted by criteria or status. Every case which meets the criteria or status is extracted.

7. Is the data retrievable by a personal identifier such as name, SSN, or other unique identifier?

Yes, by name and SSN (or other TIN).

Access to the Data

8. Who will have access to the data in the system (Users, Managers, System Administrators, Developers, Others)?

Authorized IRS personnel and contract program developers, as well as IRS organizations developing managerial and statistical reports.

9. How is access to the data by a user determined and by whom?

Data access is granted on a need to know basis. Potential users must submit requests for access form (5081) to their local management for approval consideration. Users are not permitted access without a signed 5081 form from an authorized management official.

10. Do other IRS systems provide, receive, or share data in the system? If YES, list the system(s) and describe which data is shared. If NO, continue to Question 12.

11. Have the IRS systems described in Item 10 received an approved Security Certification and Privacy Impact Assessment?

The mainframe system that provides the processing and storage capabilities for the tax processing system, including the Information Returns Processing System (IRMF), as well as Business Master File (BMF), Individual Master File (IMF), received certification and accreditation or after 8-13-2004.

12. Will other agencies provide, receive, or share data in any form with this system?

Social Security Administration (SSA) exchanges W-2, W-3 and W-4 data with the IRS. As we validate and update data, we share those changes with SSA.
Census Bureau receives an annual extract of data to use as test data for their system.

The Information Returns Master File (IRMF) maintains a current year file and a prior year file, which consists of the five tax years immediately proceeding the current tax year. Each year a new prior year file is created. This is accomplished by dropping the oldest of the five prior years and adding in what had been the current year. This processing is document in PRP 404-019. See IRM 1.15.1.2.3.

14. Will this system use technology in a new way? If "YES" describe. If "NO" go to Question 15. No.

15. Will this system be used to identify or locate individuals or groups? If so, describe the business purpose for this capability.

Yes. The business purpose is to identify and locate taxpayers who are not in compliance with federal income tax filing and payment requirements.

16. Will this system provide the capability to monitor individuals or groups? If yes, describe the business purpose for this capability and the controls established to prevent unauthorized monitoring.

Yes. This capability is the result of maintaining the repository this data, combined with the ability to perform queries and extracts. Queries are included in the audit trail (ATLAS), and extracts are performed only based on an approved request for information services.

17. Can use of the system allow IRS to treat taxpayers, employees, or others, differently? Explain.

No. If a taxpayer is identified as being noncompliant, they are subject to the same compliance activities as every other noncompliant taxpayer.

18. Does the system ensure "due process" by allowing affected parties to respond to any negative determination, prior to final action? Yes.

The IRMF System performs analysis on the data to identify potential compliance issues. The IRMF System does not make any adjustments or assessments.
The information is reviewed by IRS employees in the Wage & Investment and Small Business/ Self Employed Business Units to correspond with the taxpayer, advising them of the proposed action (either a tax adjustment to an existing assessment or establishing an initial assessment for a tax period).

The taxpayers are requested to concur, or to provide additional information. When applicable, the taxpayer is advised of their statutory appeal rights.

19. If the system is web-based, does it use persistent cookies or other tracking devices to identify web visitors? N/A.